ECB And Bank Of England Leave Rates Unchanged; Europe's Growth Forecasts Are Expected To Be Cut But Business Confidence Is Growing Slightly

Thursday, December 06, 2012 08:42
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ECB And Bank Of England Leave Rates Unchanged; Europe's Growth Forecasts Are Expected To Be Cut But Business Confidence Is Growing Slightly

Tags: European debt | European zone | world economy

Both the European Central Bank (ECB) and the Bank of England left monetary rates unchanged.
 
This is the fifth consecutive month that the ECB has taken no action, in line with market expectations.

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ECB president Mario Draghi will hold a news conference as usual to announce growth forecasts for growth and inflation for 2013 and initial forecasts for 2014.
 
Analysts expect the projected growth rate to be cut from .5%. Europe’s gross domestic product (GDP) fell .1% during the third quarter and was down .6% from one year ago.
 
The ECB has cut rates three times in the past year but the cuts have failed to stimulate growth in the region’s economy.
 
An overall effort to cut spending and raise taxes has dampened demand and eroded business confidence.
 
The debt crisis caused investors to raise concerns that Greece could remain in the euro. This has led to a tightening of credit that reduced lending by .7% to the Eurozone’s private sector.
 
Distressed countries including Spain, Portugal, Ireland, and Greece have experienced much sharper lending declines.
 
There are tentative signs the economy in Europe is improving. Business confidence in Germany rose unexpectedly in Germany, France, and Italy in November.
 
Analysts also expect Draghi to announce during the news conference that the inflation rate fell to 2.2% in November from 2.5% in October. Draghi expects inflation to fall below the ECB’s target of 2% during 2013.

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